College And Credit 101

Building Credit The Right Way

Building credit is a complicated process for anyone, but for young people — particularly college students — it can be an especially daunting undertaking. It’s traditionally unknown territory for students, leaving plenty of room for mistakes to be made and even scams to occur. That’s why it’s important to understand the best options of safely building credit if you’re a young person trying to establish yourself.

Pay Your Bills

One of the biggest factors that can help students build a good credit history with a responsible track record and a good score is paying bills. If you pay your bills on time every month, it will show in your credit history. Credit card payments typically make up 35 percent of your FICO credit score, so it reflects greatly on your score if you miss one.

Generally, a good way to pay your cards on time is by setting up automatic payment or marking a day on your calendar where you’ll take care of the payment. Make sure it’s before the due date, as that sometimes reflects greatly on your score.

Get A Card

Another important thing to do as a student in order to build credit is to get a credit card. There are cards designed specifically with students for that in mind, as many don’t have an established credit history upon entering school.

Credit cards come with a fair amount of risk, especially considering how high the interest rates can sometimes be. But it’s important to pay close attention to those types of details when applying for cards to make sure you’re making the right choice and not going in over your head.

A great way to avoid high interest rates and charges that can potentially be detrimental, while still pursuing a good credit history, is to become an authorized useron a parent or family member’s card. Authorized users are issued cards that directly link to the main user’s account, and the main user’s financial practices reflect on the authorized user’s score.

Students Are Responsible

A recent study showed that college students having generally been practicing good credit behavior and consistently paying their cards. The study, conducted by Equifax, found that 72 percent of college students were able to pay their card balances each month, while 18 percent have their parents pay for their higher education.

“We are really happy to see the younger generation is doing that or have a plan to do that,” Equifax public relations director Nancy Bistritz said. The key for any student as far as credit history is to have a plan in place and be responsible.

“If today’s students are careful with their credit, know how to use it, then they will be better able to participate immediately when they get their first jobs into our economy,” Syracuse University professor John Petosa said. “They will be able to buy a house, car and other consumer durable products which helps keep our economy moving.”

Petosa said he believed that more young people than ever are aware of how much it costs to build their future — and they’re getting smart quickly.

“Being fiscally responsible and financially savvy is a great way to approach the remainder of their life,” Petosa said. “The clear lesson to be learned is pay your bills on time, do not take out more credit than you can use responsibly and you will be able to acquire virtually anything that you desire in the future.”

If you’re a young person, particularly one in college, it’s important to build credit for your future. It might seem to be a difficult task, but if you look in the right places and make smart decisions for your financial situation you’ll have no problem building a solid credit history.